Spanish PM calls for radical reform

October 19, 2008

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By , MADRID, October 19 – Spain\’s prime minister, in an interview published Sunday, called for deep changes in the global financial system, with stricter rules and limits on the salaries paid to senior executives.

"There has to be a stricter regulation and international supervision, at least at the level of the European Union," socialist Prime Minister Jose Luis Rodriguez Zapatero was quoted as saying in the newspaper Publico.

"It is a question of in-depth reform of the financial system," he told the daily.

"There has to be regulation and limits to everything to do with incentives and rewards" for heads of businesses, said Zapatero, describing as "scandalous" some financial benefits paid to bosses which had "removed their inhibitions in the face of risk."

Zapatero also called for "new rules for credit rating agencies which bear major responsibility in this crisis."

He said that overall there needed to be greater transparency in the present financial system: "there cannot be shadowy financial products which escape practically all regulation, as has greatly developed in the United States."

"We are going to carry out (the reforms) urgently in the framework of the European Union. It is an undertaking that we have already discussed and decided upon," Zapatero said.

At the international level "the EU must take over the leadership of change because that is what it has long been calling for while the United States was not favourable."

Zapatero said that the Internatioal Monetary Fund could have a role to play in the recasting of the international financial system but it would need a new mandate and its nature and functions would have to change.

At the political level, Zapatero said the left should "show initiative with suggestions to regulate globalisation" which if not regulated "could produce disastrous effects."

US President George W. Bush, his French counterpart Nicolas Sarkozy and EU Commission President Jose Manuel Barroso agreed Saturday on the holding of a series of summits to address the problems facing the global economy.

The first summit of heads of government is to be held in the United States "soon after the US elections" which take place November 4, a statement said.

The world leaders will "review progress being made to address the current crisis and to seek agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future," it added.

Later summits "would be designed to implement agreement on specific steps to be taken to meet those principles," the statement read.